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Lee Godfrey

Regulatory reporting the smart way


KNEIP is one of the fund industry's foremost legal and regulatory report providers. Over the years it has helped traditional asset managers overcome the data management complexities of regulated UCITS funds.

More recently, since the introduction of AIFMD, KNEIP has watched closely as hedge fund managers have fought to overcome the stranglehold of Annex IV reporting – depending on the size of the manager, they must file quarterly, semi-annual or annual reports and collect large volumes of reliable, consistent data.

Data ownership

"In the first instance, you have to analyse the symptoms of the problem," says Lee Godfrey, Deputy CEO of KNEIP. "This requires understanding where the data comes from; what's the source? A manager might respond, `It is centralised with the back-office of the AIFM in Luxembourg'. But once you dig down, you soon discover that the data doesn't originate in Luxembourg, it originates with the fund manager based in New York who has appointed a third party AIFM. It might still make sense to centralise the data in Luxembourg but will the data be updated regularly? If the source of data is only updated every three months that is not sufficient. 

"Managers have to ensure that the source of their data is right on the pulse. This is what KNEIP helps to ensure."

Once it has been determined where the primary source of fund data is and who owns it, the next step is to determine the best way to collect it. 

"It might be that the client has a better solution for doing this internally. If not, we step in and extract it directly from the source. In the above example, we sourced the data directly from the manager in New York and circumvented the AIFM in Luxembourg. The AIFM does not abdicate responsibility, they delegate that responsibility to us," confirms Godfrey. 

Automated checks

Once the data is sourced and collected, KNEIP's system performs a number of validity checks, coherence checks and formatting checks before data is loaded into the database.

"We then perform a second level of checks based upon a particular guideline. All of these checks are fully automated. When it comes to the data outputs, the production of a particular regulatory report is very straightforward: it's a full straight-through processing arrangement," says Godfrey. 

This is all managed within KNEIP's private cloud which uses a Tier 4 data centre. 

Regardless of whether the relationship that fund managers have with their data is internal with their own data management team, or external with a specialist such as KNEIP, it is critical that they keep on top of regulatory change. 

Godfrey points out that KNEIP produces financial reports for more than 10,000 funds, of which approximately 80% of them rely on KNEIP for regulatory reporting. "In Luxembourg, we have something called the O1.1 report, which is being superseded by the U1.1 report on 6th June 2016. It's basically the same report, give or take a little bit of data, but the format is changing from Excel to XML. Clients contacted us panicking, asking what they should do. We replied, `Don't worry. We've taken care of it.'"

As hedge fund managers settle in to their new role of complying with regulatory reporting, the more help they receive from a supporting cast of technology providers the easier their lives will become

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